After its 50th deal over the past 15 years, one of the largest RIA consolidators is predicting that wealth management’s record-breaking M&A won’t be letting up in the near future.
Captrust purchased Nachman Norwood & Parrott Wealth Management, a Greenville, South Carolina-based firm with eight financial advisors managing more than $2.1 billion in client assets, the parties said July 8. The firms didn’t disclose the purchase price of the deal, which closed at the end of May. It’s the fourth acquisition by Captrust this year of a firm with at least $1 billion in client assets and the RIA’s fifth overall of 2021 after completing seven last year.
Nearly a decade earlier, Captrust expanded its initial acquisition focus on retirement plan firms to wealth management practices as well, Rush Benton, the firm’s senior director for strategic growth, said in an interview. The move by one of the industry’s most active acquirers came just before wealth management M&A reached record volumes for eight straight years, with 2021 on pace for a new high again, according to investment bank and consulting firm Echelon Partners.
“The market’s accelerating, the activity is accelerating, the deals are getting larger,” Benton says. “It’s a little hard to say where we might get to eventually, but I don’t see it slowing down anytime soon.”
In fact, because private equity firm GTCR bought a 25% interest in Captrust at a $1.25-billion valuation last year, there is “no capital constraint at this point” for any other future acquisitions, according to Benton. In the first two months of the year, Captrust unveiled two incoming practices that both had more than $3 billion in assets under management, plus a deal for a retirement plan firm that has $154 billion in assets under advisement.
The incoming group has 17 employees, including seven partners: Bob Nachman, Ben Norwood, Wes Boyce, Al Cannon, Maura Copsey, Gary Davis and Russ Miller. Nachman Norwood’s RIA has more than $2 billion in AUM while working with Purshe Kaplan Sterling Investments as its broker-dealer for the small portion of non-advisory assets. Under the deal, the practice will join Captrust’s RIA and broker-dealer. Prior to spending the past three years with PKS, the 32-year industry veteran Nachman first went independent in 2007 with Wells Fargo Advisors Financial Network, according to FINRA BrokerCheck.
Last year, the head executives with the firm began creating a new 10-year strategic plan laying out how best to “advance our service and advice to a higher level,” Nachman says. Rising valuations in RIA M&A deals, the risk of higher taxes affecting future deals, and succession and continuity planning made the timing good for a deal with Captrust, he says.
“As we dug into it, we came to realize that it was going to be a big lift to do that ourselves, and there are certainly good firms out there who have already built superior resources,” Nachman says. “We felt very comfortable with the people, the mission, the business alignment as well as their resources.”
In the first two quarters of 2021, strategic buyers and consolidators like Captrust, Wealth Enhancement Group, OneDigital and Beacon Pointe Advisors made 42% of the wealth management M&A deals, compared to 32% in 2020 and 29% in 2019, according to Echelon. The sellers in the firms’ deals had an average of $1.9 billion in AUM, and the industry is on track for more than 100 transactions involving firms with at least $1 billion.
The strategic buyers and consolidators “often seek to solve for the industry’s most common driver of transactions — succession planning,” according to Echelon’s second-quarter M&A report. “We expect activity for this group of buyers to remain high, as many concentrated, seasoned ownership groups seek liquidity before next year’s potential tax increases.”